Ikea Case Analysis

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IKEA Case Analysis
IKEA has a distinct market segment in the home furnishing arena. It has created a niche market with innovative designs, quality, and low price structure. IKEA has employed the cost leadership and product differentiation strategies through low price structure and innovative designs, respectively. Additionally, the uniqueness of the disposable furniture concept allowed IKEA to capitalize on the first mover advantage (Harrison & Enz, 2005). Behavioral Customer Segmentation for IKEA

The behavioral consumer segmentation data provided by Bartlett and Nanda (1996) indicates the demographic profile of IKEA customers and buyer behavior. IKEA’s strategy post World War II, was to target young couples and new families in the low to middle income range by providing inexpensive furniture with durable construction and contemporary lines. The demographic profile presented by Bartlett and Nanda (1996) suggests that the archetypal IKEA buyer is young; middle-class; married; either has no children or one child; and lives in a rental. This new target market’s primary determinants to purchase were based predominantly on price (44%); followed by large assortment (16%); and design (14%). Quality; design; and price were the three most important criteria for store choice. Similarly, price; distance; and design were the significant factors leading to consumer attitude toward IKEA. This target market based their decision purchases on information gathered from the IKEA catalog; visits to other stores; and prior visits to IKEA.

Contrary to the traditional IKEA consumers’ determinants to purchase and buyer behavior, sustainability is now playing a larger role in consumer spending habits (Datamonitor, 2010). In a recent Customer Satisfaction Index (CSI) analysis IKEA was ranked ninth overall for customer satisfaction, which is largely due to IKEA’s commitment to sustainable initiatives. Of IKEA’s products, 71% are recyclable, made from recycled products, or both. IKEA also recycles 84% of the waste the stores generate (Datamonitor, 2010). Comparison of Traditional and U.S. Customers

Before entering the U.S. market in 1985, IKEA did not conduct thorough market research on U.S. consumers or U.S. buyer behavior. IKEA assumed that U.S. customers would embrace its way of doing business and the products offered. That was not the case, as IKEA’s furniture; metric measurements; and kitchenwares did not meet U.S. customer’s expectations. The furniture was uncomfortable, as it was designed for the European preference of being hard and rigid. The unit of measure was in centimeters, whereas the U.S. has never adopted the metric system. The U.S. serving sizes are generally larger than the European portions, making the kitchenwares too small for U.S. servings. Likewise, the cabinetry was too small for U.S. appliances.

The traditional IKEA customer subscribed to the value proposition that furniture was a soft good versus a hard good. This value proposition was in contradiction with the mindset of the U.S. consumer, making it necessary for IKEA to rethink its marketing strategy. IKEA launched an advertising campaign targeting U.S. customers at the same time it entered the U.S. market. Its tagline for U.S. consumers was, “…to take a more commitment-free approach to furniture” (Moon, 1996, p. 8). IKEA’s intention was to convey to the U.S. population that it was not necessary to hang on to furniture for decades. The simplicity and low price point IKEA offers affords consumers the opportunity to replace furniture and opt for a new look at a significantly lower price point than at conventional furniture, appliance, or kitchenware stores. IKEA was essentially making fun of U.S. consumers and the desire to keep furniture for decades. Traditional consumers understood that the value proposition offered by IKEA meant no in-store sales assistance; limited variety; unassembled furniture; and no delivery. This did not meet any of...
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